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10 February, 16:06

Doyle Company issued $360,000 of 10-year, 8 percent bonds on January 1, Year 2. The bonds were issued at face value. Interest is payable in cash on December 31 of each year. Doyle immediately invested the proceeds from the bond issue in land. The land was leased for an annual $53,500 of cash revenue, which was collected on December 31 of each year, beginning December 31, Year 2.

Organize the transaction data in accounts under the accounting equation for Year 2 and Year 3.

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  1. 10 February, 19:08
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    The balance of the equation at end of year 2 is$388,800

    The balance of the equation at end of year 3 is $417,600

    Explanation:

    Assets = Liabilities + shareholders' equity

    Land + cash Bonds payable retained earnings

    1/1/year 2 $360,000 = $360,000

    1/1/year 2 $360,000 ($360,000)

    31/12/year2 $53,500 = $53,500

    31/12/year2 ($28,800) = ($28,800)

    Balance $388,800 = $388,800

    Opening balance $388,800 = $388,800

    31/12/year3 $53,500 = $53,500

    31/12/year3 ($28,800) = ($28,800)

    Balance $ 417,600 $417,600

    The interest on bond=$360,000*8%=$28,800
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